Sales Tax Fairness

This month marks the one year anniversary since the Senate passed bipartisan legislation that would allow states to require online sellers to collect the same sales tax as local stores, and now it’s the House’s turn to act. Online sellers currently have a price advantage over bricks-and-mortar retailers, and small retailers are hit hardest due to their inability to absorb higher costs. We live in a world of omnichannel retail – a sale is a sale, no matter what the channel. It’s time America’s sales tax collection system matches 21st century retail and works for companies both large and small, on Main Street and online.

Implementation of the Affordable Care Act

Now that health care reform legislation is the law of the land, many small business owners are asking how they will be impacted. Central to their uncertainty is a burdensome provision within the ACA that defines full-time employment for health benefit eligibility as 30 hours per week – far below the typical definition of full-time work as 40 hours. Mandating employers to provide health coverage for full-time workers is already a significant burden for small businesses. Forcing them to define full-time as 30-hours creates even more challenges and defies common sense. This year, the House passed the Save American Workers Act to restore the traditional definition of full-time work to the ACA, and legislation is moving forward in the Senate.

Minimum Wage and Overtime Rules

In his State of the Union address, President Obama proposed an increase in the Federal minimum wage to $10.10 an hour from $7.25. The Senate recently voted on such a proposal, though it failed to get enough votes to move forward on the actual legislation. NRF believes efforts to raise the minimum wage are rooted in political talking points, not sound public policy. Washington shouldn’t be telling small retailers and restaurants how to run their business. The last thing mom-and-pop shops on Main Street need is another burdensome mandate imposed by Washington. And more new mandates are on the way next year. The President’s latest idea – to significantly alter overtime rules – already has employers scrambling with uncertainty over payroll costs.

Patent Trolls

Patent trolls are increasingly targeting Main Street retailers who lack the financial resources and legal expertise to fight back. The cost of going to court is so high that many small retailers are forced to pay up, diverting much-needed resources from growing their business. Congress is working on a bill to put limits on the lengths trolls can go in extorting money from innocent businesses, and NRF has been leading the fight.

Main street retailers are the heart of our communities and stand at the very core of what it means to live in America. Despite all of the partisanship and political stalemate that we hear of in the news, there are retail advocates in Congress who have consistently supported public policy initiatives that recognize the important contributions of small retailers. This week, NRF will recognize our “Heroes of Main Street” for their support of policies that are important to the retail industry. The awards are a chance to honor elected officials who are doing their part to encourage a healthy, vibrant retail sector.

Retailers can stay informed and make their voice heard in Washington by getting involved with NRF and state retail associations and using these channels to let elected officials know how these issues impact Main Street. Better yet, attend the upcoming Retail Advocates Summit this July on Capitol Hill and educate elected officials about the issues affecting your bottom line.

There is a little bit more of a thaw in the works in health care, of all places. The House Ways and Means Committee voted 23-14 today to approve H.R. 2575, the Save American Workers Act. I testified on NRF’s behalf in support of this legislation before the committee last week. It was a surprisingly positive and encouraging experience: they listened.

We congratulate Representative Todd Young, R-Ind., the sponsor of the bill. We’re happy to see it approved by the committee and hope to see it passed soon by the full House. At long last, the two sides are at least talking about helpful changes to the law. That defines improvement – and a Siberian-caliber thaw.

This bill would delete the Affordable Care Act’s 30-hour definition of full-time for benefit eligibility and substitute 40 hours in its place. The ACA’s 30-hour definition has thrown a monkey wrench into workforce planning for retailers and retail employees alike. Suddenly, a part-time employee can work no more than 29 hours and change per week. This is real money taken out of their paychecks. Many might have to seek a second or third job to make up for the loss of income.

This provision also complicates life for managers seeking to fill schedules. Retailers will average variable-hour employees to see if their average hours crest 30 hours. If so, then the employee gets health care coverage for as long as his or her hours were averaged. If not, the averaging clock starts all over again. Confused? You are far from alone – but not far from help.

NRF-member retailers and chain restaurants can tune in for our next health care policy webinar Thursday, February 6 from 2-3 pm EST. I will help explain the perils, pitfalls and provisions of the health care law this year and beyond. NRF’s health care resource center is the best place to stay updated and informed as the thawing continues.

1. The Senate passed sales tax fairness legislation. On May 6, 2013 the Senate voted in favor of the Marketplace Fairness Act. While the House didn’t act on the legislation in 2013, we did see House Judiciary Committee Chairman Bob Goodlatte issue seven principles to include in consideration of any efairness legislation – a positive step forward that indicates the House may take up legislation in the New Year.
2. In July, the Administration delayed implementation of the employer mandate of the Affordable Care Act. Delayed until 2015, this will give retailers more time to figure out how to implement the requirements of the law to provide health care coverage to their employees if they have more than 50 full-time (or full-time equivalent) employees.
3. We saw movement on comprehensive tax reform. Senate Finance Committee Chairman Max Baucus and House Ways and Means Committee Chairman Dave Camp started working on tax reform proposals that would simplify our tax code. They even embarked on a Tax Reform Tour of businesses in 2013 that included a stop at NRF and New Jersey Retail Merchants Association member and retailer Mrs. G’s TV, Appliances and Sleep Center.
4. Congress and the White House got serious about patent trolls. The House passed the Innovation Act, which aims to curb the abusive practices of patent trolls that prey on end users like retailers, on December 6, and the Senate held one hearing on December 17 and is expected to take up the issue in early 2014. The White House is also engaged and issued executive actions as well as legislative recommendations earlier this year.
5. Congress finally agreed on a budget deal to keep the government running and avoid another shutdown. Right before the holidays, this was great news for retailers and consumers. Even better, the deal extends for two years, giving another year of certainty for retailers and their customers and providing an opportunity for Congress in 2014 to focus on unfinished business like comprehensive immigration reform, tax reform, meaningful patent reform, and sales tax fairness.

We could not have gained this momentum without retailers sharing their stories. Join NRF in 2014 as we call on our leaders to view every policy decision through the lens of whether it supports or hinders job creation for America’s largest private sector employer.

The economy grew at 2.8 percent in the third quarter (July, August, September), better than the consensus expectation. GDP growth is likely to be revised upward in the coming months as more updated data – delayed by the shutdown – are included. The most recent retail sales numbers, jobs report and claims data show that the third quarter was stronger than many anticipated, and the fourth quarter may be picking up some steam as well, demonstrating some underlying positive – but still below-par – momentum in the recovery. NRF members can see a more in-depth economic picture by downloading this month’s Monthly Economic Review report.

Economic activity has held up surprisingly well in recent months in spite of ongoing political and policy uncertainty, which continues to be an impediment to growth. While there is still a long way to improve and more job growth is needed to truly spur economic growth and investment, my belief is that the contours of the consumer landscape remain in relatively good shape, and that several fundamentals indicate the consumer is in pretty good shape. Here’s why:

• The wealth effect is helping. While it has taken time to get traction in this recovery, household net worth – housing and financial assets – is up. A rebounding housing recovery and record-breaking stock prices have created lift for consumer spending.

• Unemployment is in check. Unemployment claims are at pre-recession levels, and employment gains were up last month by 200,000. There were also revised and marked increases in August and September. The unemployment rate remains stubbornly steady, though, at 7.3 percent.

• Consumer price increases are benign. On a year-over-year basis, the Consumer Price Index has risen only 1.0 percent, the smallest 12-month change since October 2009. Inflationary pressures remain dormant and are expected to remain below 2 percent.

• Pain at the pump has lessened. Lower gas prices have freed up billions of dollars of consumer spending. Prices at the pump have dropped to their lowest levels since early 2011. Hopefully reduced prices will persist to give consumers extra discretionary dollars in their wallets this holiday season.

• Household income has improved. During the past several months, incomes have marginally increased. Together with an improved labor market, it may lay down a stable foundation for improved consumer spending.

All in all, the above points signal an increased ability to spend but businesses, banks and consumers remain especially cautious about borrowing and spending.

The economy is growing but it remains slow and unsteady.

Consumers have borrowed for big ticket items in the past but there appears to be a shift in credit usage. Historically with debt paid down, households feel richer, become more hopeful about the future, and begin to use credit cards to boost spending. This has not been the recent, post-recession experience. This reluctance to utilize credit is a key sign that consumers remain uneasy about the current and future economic outlook. This could also be, due in part, to tighter credit qualifications and consumers not wanting to pay fairly high credit card carrying costs.

The backsliding in consumer confidence is also noteworthy. Confidence measures no doubt point to increased uncertainty regarding the unresolved federal government questions before our country, and perhaps even to the bumpy implementation and rollout errors of the health care reform law, the Affordable Care Act. Though headwinds and policy decisions or indecisions will likely play into consumer confidence in the near-term, I never count the consumer out. Nor should you.

American consumers and shoppers are ever-resilient.

As the holiday season gets into full swing this week with Thanksgiving and Black Friday, shoppers should have a bit more giddy-up in their spending as they have made a lot of headway in terms of their ability to spend this year. The early arrival of winter weather should also help prompt shoppers and retailers get into the holiday spirit and stir up images of positive holiday shopping experiences and memories of holidays past. A decent holiday season and the cumulative gains discussed above could be the springboard the economy needs in 2014.

The news comes less than a week after my testimony before a congressional committee asking lawmakers to delay implementation of the law, although the decision was certainly already well in the works at that point. But what does this announcement really mean for retailers? Here are some issues to consider moving forward:

• Retailers now have another year to figure out how to implement the employer mandate and determine the best business model for compliance. In announcing the delay, the Administration acknowledged that employers had concerns about the complexity of the regulations. This year gives elected officials more time to ensure the regulations are easy for retailers to follow and to address specific problems.
• Unfortunately, the delay could also mean that employment will continue to fluctuate. Retailers will have the need to hire more workers but fears over the cost of implementation are still out there and could hold retailers back from adding employees. The delay creates some breathing room, but also means another year when retailers will have to decide whether or not to hire and how.
• This postponement provides another year to urge Congress and the Administration to address existing concerns with the employer mandate, especially the 30-hour definition of “full-time” and the threshold of 50 full-time employees to be covered by the mandate.  It’s because retailers – from Main Street store owners to nationally known brands to members of NRF’s National Council of Chain Restaurants division – spoke up and made their concerns known that we achieved this delay. It’s critical these voices stay loud in order to avoid a cascade of last-minute regulations that could be ahead.

Ideally, more legislation will be approved by Congress over the next year to soften the impact of the ACA. The Small Business Job Protection Act, sponsored by Representative Luke Messer, R-Ind., would amend the measure to apply only to businesses with 100 or more full-time workers rather than 50. There’s also the Save American Workers Act, sponsored by Representative Todd Young, R-Ind., that would define full-time as 40 hours per week rather than 30. The more amendments to make the law as workable as possible, the better.

No doubt there will be questions about compliance and how to prepare for what could be next. I will host a webinar on July 10 that will provide retailers with the opportunity to ask questions about compliance requirements. I’ll be prepared to answer questions at the conclusion of my presentation.

Days after NRF Vice President and Employee Benefits Policy Council Neil Trautwein testified before the U.S. House of Representatives Energy and Commerce Subcommittee on Oversight and Investigations on the “Challenges Facing America’s Businesses Under the Patient Protection and Affordable Care Act,” he took the same message to Fox Business – NRF stands ready to help the Administration and Congress make the law as workable for employers as possible. But as currently written, retailers and chain restaurants have serious concerns about the quickly approaching deadlines for full implementation.

Watch Trautwein’s segment on Fox Business below.

1. Sales tax fairness – After working on it for over a decade, Congress is the closest they’ve come to passing legislation that would empower states to require online retailers to collect sales tax. The Senate passed the Marketplace Fairness Act in May and now it’s the House’s turn. This week, the National Governors Association and the National Conference of State Legislatures called for passage and helped demonstrate software that would automate the collection process. While tax-free online sellers hold a price advantage over all retailers large and small, Main Street stores are hit hardest. The Senate has done its part but it’s still important to remind your House representative why this legislation is fair and critical to have a level playing field between online and brick-and-mortar retailers.

2. Swipe fees – A broad cross section of retailers from across the nation have opted out of a flawed settlement of an antitrust lawsuit over Visa and MasterCard’s credit card swipe fees. The proposed settlement does nothing to bring the soaring fees under control, but would take away retailers’ right to any future legal challenges to the fees and related card company rules and restrictions. NRF led retailers in asking a federal judge to reject the proposed settlement, and merchants are now waiting for a September hearing on approval. The issue is important to small retailers because their low credit card volumes mean they pay higher fees than large retailers. The debate is ongoing, and retailers can sign up for updates.

3. Patent trolls – The name might conjure up funny images but patent trolls are a very serious problem for the increasingly high-tech retail industry. Trolls buy old, obscure patents and then threaten to sue companies using the technology unless they pay a licensing fee. The cost of going to court is so high many victims are forced to pay up. Both large and small retailers are targeted, but small merchants are easy prey because the trolls know they lack the financial resources and legal expertise to fight back. Whether the cases are settled or go to court, they divert much-needed capital that should be invested in retailers’ business and job creation instead. Fortunately, half a dozen members of Congress have proposed legislation to address the issue, the White House has announced a crackdown, and the Federal Trade Commission this week announced plans for an investigation. NRF is working with lawmakers to find a solution that will protect retailers from being subject to these baseless lawsuits.

4. Affordable Care Act implementation – Retailers everywhere will have to make important decisions this summer and fall to prepare to meet requirements of the Affordable Care Act that take effect in 2014. The law requires companies with 50 or more full-time employees to provide them with health insurance at government-mandated levels of coverage or face huge fines. But with complex equations for determining what constitutes “full time” and arbitrary guidelines for what is affordable, even small retailers need to pay attention. The House has taken up repeal several times, and legislation is pending that would address specific problems, but until they are passed the ACA remains the law of the land. NRF has free resources for retailers to help them navigate compliance, and will address compliance in a webinar on July 10.

Amid all these issues, it’s good to know retail has advocates in Congress. This week, NRF recognized 136 members of Congress as “Heroes of Main Street” for their support of the retail industry’s public policy priorities.  Recipients of these awards have supported policies and initiatives that recognize the important contributions of the retail industry, and have worked to encourage a vibrant, sustained and healthy retail sector. This year’s recipients were recognized for their support and sponsorship of the Marketplace Fairness Act. The awards are a chance to say “thank you” to the men and women who are making decisions that will ensure local retail keeps growing.

Retailers can stay informed on new developments by getting involved with NRF and state retail associations and using these channels to let elected officials know what these issues can mean on Main Street.

HMOs were the health care “reform” of the days before computers, iPods or even the Walkman. They were going to make insurance cheaper, make it easier to get in to see a doctor, and costs would be kept manageable with small co-pays instead of paying bills up front and waiting to get reimbursed.

What a joke. Within a few years, HMOs became the gatekeeper of American health care. Doctors pressured to see a maximum number of patients per day for whatever the HMO was willing to pay no longer had time to play Marcus Welby. (Click on the link if you’re not old enough to remember the show.) Your “family doctor” was replaced with a “primary care physician” – HMO-speak for a general practice doctor you had to pay to see in order to get permission to see the eye doctor, ear doctor or other physician you really needed to see. And whose real job was to keep you from getting to see the more expensive specialists.

All along the way, health insurance premiums, co-pays and deductibles continued to rise, soaring to unimaginable levels. It got to the point where millions of Americans were going without health care because they couldn’t afford health insurance. It wasn’t long before the buzzword of “health care reform” came around again, beginning with the Clinton Care of the 1990s.

Two presidents later, health care reform – aka Obamacare – was signed into law in 2010. And after three years of drafting rules and regulations, the new law is set to take effect in 2014.

The only problem is that Washington – with more than a generation to reflect on the issue and the past five years or more to pass a law and write the regulations – got it wrong.

The goal in health care reform was to make coverage more accessible by making it more affordable. Health care reform was supposed to find ways to reduce the cost of medical treatment and also reduce the price of health insurance. Instead, what we got were mandates: Government mandates that all “large” employers – those with more than 50 full-time employees – provide health insurance to full-time workers. Mandates on what must be included in that insurance. Mandates on what constituted “full-time.” Mandates on what would be considered “affordable” insurance. Mandates on how quickly coverage must be offered to new workers. And, finally, mandates on how much employers will be fined if they fail to comply.

Rather than a way to help businesses provide better benefits for their workers, health care reform has instead become an attack on the business community – and retailers are directly in the crosshairs. The costs of all the mandates are so high that some small retailers are being forced to stay under the 50-employee threshold and even larger companies are being forced to cut hours of existing workers so they won’t be counted as full-time. (Under the law, employees working as little as 30 hours would be considered full-time instead of the traditional 40 hours, capturing many workers traditionally considered part-time.) Instead of helping workers, the new law is discouraging job creation.

NRF worked closely with Congress to bring about health care reform that would work, but somewhere along the way lawmakers stopped listening. We have encouraged repeal of the misnamed Affordable Care Act as recently as this month. But given the reality that “reform” is here to stay, we have also formed groups such as the Employers Health Care Clearinghouse to help retailers learn how to comply with the new law.

After going through doldrums where the Administration was slow to issue the regulations retailers and other businesses needed to prepare for the new law, HR executives are drinking from a fire hose of promulgations and announcements. News is coming almost daily on issues such as the package of “essential” benefits or the new “summary of benefits and coverage.” Even though reform doesn’t take full effect until January, businesses soon need to start tracking worker hours to determine who counts as full-time, and more requirements are coming.

NRF has kept up a steady stream of memos to member companies, conducted numerous calls and held many meetings to help retailers figure out how to make sense of all these requirements. On April 4, we will conduct our latest effort when NRF’s Neil Trautwein will host a webinar titled “Ready for the ACA? New Regs, New Challenges”.

Trautwein, by the way, is one of the utmost experts on health care policy in Washington. He has been dealing with these issues almost as long as I’ve been writing about them, and was brought on board at NRF in 2006 specifically to help retailers navigate through health care reform. He guided creation of NRF’s Vision for Health Care Reform, a plan that would have brought forth true reform to benefit employers and workers alike. Had lawmakers listened to his advice, health care reform might have worked.

As for myself, I found the ultimate end-run around HMOs, PPOs and all the other variations of the health insurance system – I married a doctor.

Ratner and I kept our presentation simple, as the most basic issues retailers need to know about this year breed endlessly complex sub-issues: How big must you be to be subject to the law? What options will be available to you? What implications does this have for your workforce, especially at the entry level? A few of the more popular topics included averaging employee hours over time to deal with variable hour employees (a.k.a. the “look-back”), the size of penalties, and the curious exclusion of the first 30 employees. Bottom line: Health reform is coming, and the retail industry can – and should – face it affirmatively.

But as new rules roll out, NRF continues to analyze the nuances of the law for our members and retailers across the country. On February 1, I presented a more in-depth survey of retail concerns. NRF’s “Ready, set … Are You Ready for the Affordable Care Act?” webinar took another dive into some of the basics, exploring ways the ACA could shape future workforce decisions. For those who missed it or need a refresher, retailers can register for on-demand playback. NRF’s ongoing health care webinar series will continue on April 4, taking a closer look at the new regulations and challenges for retailers that take effect in June.

As always, www.retailmeansjobs.com/healthcare is full of free resources for retailers to learn more about the ACA. And NRF’s Health and Employee Benefits Committee meets on a monthly basis to evaluate the latest issues. Together, the retail industry will have a full head of steam to overcome the health care reform learning curve.

Ratner is the American Dream personified. From his humble, garage-based start, he has built his business into a six-store chain that competes with and thrives against larger stores. But Ratner didn’t have to cope with the Affordable Care Act when he was starting out. In the latter years he has dealt with comparable concerns under the Massachusetts reform law. The ACA will add new complexity to the mix in the years ahead, particularly in regard to future expansion. I can tell you first-hand that the details at times can be a bit mind-numbing.

New ACA rules for coverage and penalties will begin in January 2014. Generally, a business with 50 or more full-time employees (at 30 hours per week; whereas part-time employee hours are totaled to determine the equivalent to full-time employees) must provide qualifying and affordable coverage to full-time employees or pay substantial fines. Dependents of full-time employees must also be offered coverage but the employer will not be penalized for not contributing to that coverage. Different rules will determine when the ACA mandated coverage is “affordable” or not to eligible employees. These are a few of the topics I’ll discuss with business owners in a webinar on February 1.

Entrepreneurism is the very soul and essence of Main Street. Attaching consequence – a spiked ceiling, in effect – to growth at 50 employees could chill the drive that fuels Main Street entrepreneurs like Ratner. The cycle works so that growth builds jobs which helps fuel the proliferation of further growth and jobs, and so on. Anything that threatens to stunt that growth is cause for concern.

NRF continues to work closely and cooperatively with regulators in the Obama Administration to help make it easier for retailers of all sizes to cope with the ACA’s implementation. Hopefully our session will help inoculate Ratner and his Main Street peers against some of the more severe and unintended effects of health care reform. Now that sounds much healthier, doesn’t it?